Refinancing loans is not always profitable, warns Banki.ru expert

Russians’ interest in refinancing loans against the backdrop of a consistent reduction in the key rate is gradually recovering, but the decision to reissue a loan does not always mean real savings, warned Inna Soldatenkova, head of expert analytics at the financial marketplace Banki.ru. She shared her comment with Lenta.ru.

According to the expert, the main mistake of borrowers is to focus only on reducing the monthly payment. Its size may become more comfortable, but if a new loan is issued for a longer period, the final overpayment may be even higher, she explained.

First of all, Soldatenkova called for assessing the difference between the current and new interest rates. “If it is less than 2 percentage points, there may generally be no tangible savings, especially if more than half of the loan has already been paid off. The fact is that at the beginning of the term, most of the monthly payment falls on interest, and towards the end - on repayment of the principal debt. In such a situation, you actually return to the beginning of the schedule, where the share of interest in the payment structure is maximum,” said the interlocutor of Lenta.ru.

It is equally important to pay attention not only to the interest rate, but also to the full cost of the loan, the speaker pointed out. She advised taking into account additional costs that often go unaddressed. For example, with mortgage refinancing, these may include costs for insurance, real estate appraisal, notary services and other fees provided for by the bank’s terms and conditions.

Also, before applying for a new loan, it is useful to calculate the payback period for refinancing, the expert noted. So, if additional expenses amount to 20 thousand rubles, and the monthly payment is reduced by 2 thousand rubles, actual savings will begin to appear only after ten months, Soldatenkova gave an example. If the borrower plans to fully repay the loan before this date, re-registration may not be profitable, she clarified.

“Credit card refinancing deserves special attention. It is most justified if the new product offers a rate at least 2 percentage points lower than the current one or an increased grace period - for example, up to 120-200 days instead of the standard 55-60. However, after transferring debt, it is important not only to pay off the debt, but also to officially close the old credit card. Simply resetting the debt to zero does not mean termination of the contract and may affect the subsequent credit load,” concluded the Lenta.ru interlocutor.